AKAMAI TECHNOLOGIES INC Q1 FY2025 earnings call

• Akamai had solid first quarter results with revenue growth, non-GAAP operating margin above guidance, and non-GAAP earnings per share well above guidance. - Security and compute combined to 69% of total revenue, growing 10% year-over-year. - Delivery had better-than-expected results due to improved traffic growth and new customer accounts from Edgio. - Cloud computing continued strong momentum with new capabilities, new accounts, and expanded go-to-market. - Sales transformation efforts are on track, rebalancing sales team and implementing better sales play methodology. - Monitoring global economic and political challenges, including tariffs and potential recession impacts.

First quarter revenue was $1.015 billion, up 3% year-over-year reported and 4% in constant currency. Compute revenue was $165 million, a 14% year-over-year increase as reported and 15% in constant currency, contributing 16.26% to total revenue. Security revenue was $531 million, growing 8% year-over-year reported and 10% in constant currency, accounting for 52.32% of total revenue. Security and compute combined to 69% of total revenue. Delivery revenue was $319 million, down 9% as reported and down 1% in constant currency, representing 31.45% of total revenue.

• Q2 revenue projected in range of $1.012 billion to $1.032 billion, up 3% to 5% as reported and in constant currency. - Q2 non-GAAP EPS expected in range of $1.52 to $1.58. - Full-year 2025 revenue expected $4.050 billion to $4.2 billion, up 1% to 5% as reported and in constant currency. - Security revenue growth expected ~10% in constant currency for 2025. - Compute revenue growth expected ~15% in constant currency, with cloud infrastructure ARR growth 30% to 45% in constant currency. - Non-GAAP operating margin estimated ~28% for Q2 and full-year 2025.

• Impact from macroeconomic trends. - Geopolitical developments. - Potential recession impacting customers. - Concerns from international customers about relying on US companies for critical infrastructure. - Federal sector cutbacks potentially impacting revenue.

Q: Amit Daryanani asked about what drove the upside in delivery and if it can sustain.

A: Ed McGowan said it was traffic growth, and they are being cautious as it's the third quarter of flattish sequential revenue but seeing decent trends in April.

Q: Jonathan Ho asked about the role of Akamai's AI firewall with agentic AI.

A: Tom Leighton explained about protecting AI apps from attacks, including data leaks and offensive content.

Q: William Power asked about what sets Akamai apart in security and progress in zero trust.

A: Tom Leighton mentioned scale, ease of use, trust, and Guardicore as the flagship zero trust solution.

Q: Jeffrey Van Rhee asked about security segment performance and compute trends.

A: Ed McGowan discussed security segment mix shift and compute trends playing out as expected.

Q: Patrick Colville's team asked about non-delivery cross-sell from Edgio.

A: Ed McGowan said there's opportunity to upsell as customers are migrated and campaigns are built over time.

Q: Rudy Kessinger asked about compute growth quantification.

A: Ed McGowan explained growth breakdown between cloud infrastructure service and legacy compute.

Q: John DiFucci asked about ramping up growth with new channel partners for security products.

A: Tom Leighton and Ed McGowan discussed use of different channel partners and potential to sell other products through them.

Q: James Fish's team asked about security segment weakness.

A: Ed McGowan said results were in line with expectations, with growth from new sales like API security and Guardicore.